<p>From those that have been there, done that - what advice do you have for a newbie?</p>
<p>When/How/Where do I set up financials so everything is in order? Really the only think I know is to look for scholarships, EFC calculator, FAFSA pin # - but that is really for when my student is a senior.</p>
<p>How do I prepare now for what is a very uncertain economic time. I have been a stay at home mom for many years - is that detrimental or beneficial in terms of financial aid?</p>
<p>DEFINITELY run the EFC calculator at the collegeboard website. </p>
<p>Being a stay at home mom (or only have 1 working adult in a 2 parent family) I think affects the work allowance in the fafsa. Realize that some schools use the CSS profile and that is what is referred to as the ‘institutional method’ of calculating how much you can afford to pay.</p>
<p>I can’t emphasize running these numbers ASAP so you have a clue as to what your EFC will be. If you have money saved under the kids names, move it into your name if possible as student assets have no protection allowance and they are assessed at a much higher rate than parents assets.</p>
<p>One important factor to remember is that FAFSA doesn’t include retirement savings (IRA, Keough, 401(k), etc.) as being available to pay for your children’s education. Money in bank accounts and brokerage accounts is considered to be available. If you haven’t maxed out your IRAs or your husbands retirement funds, you have time in the next couple of years to shift money that is currently in a visible-to-FAFSA location, to an invisible-to-FAFSA location.</p>
<p>The CSS-Profile will look at those retirement funds, but most colleges and universities only use the FAFSA.</p>
<p>As for specific investment vehicles (stocks vs. bonds vs. CDs vs. savings-type accounts), the standard recommendation is that any money you will need in the next five years should be in a conservative investment. Some 529 college funds automatically shift investments from stock/bonds to CDs/Money Markets about two years before the student would be expected to enroll.</p>
<p>I first ran the calculators when Happykid was in 9th grade. I ran them again in 10th grade, and had to accept that that huge figure is the figure the colleges/universities will expect our family to be able to pay. Knowing how much the colleges/universities will expect, and knowing how much we consider to be actually do-able means that Happykid can go into the college application next fall fully informed. Her list will be a financially realistic one. No “I just found out that I can’t pay for my dream school” threads will be started from our household.</p>
<p>I would suggest a few things if they’re applicable to your situation:</p>
<ol>
<li><p>Plan when to realize capital gains. If you have investments that have accumulated unrealized gains over the years, take those gains the year before your FAFSA base year so that they’re not included in your AGI for your base year. This includes gains in both your joint accounts and any accounts owned by your child. If your student will start school in 2012, then your base year will be 2011.</p></li>
<li><p>Move any student-owned funds that are targeted towards paying for college into a student-owned 529 account. For example, if your student has a savings account for spending money and a UGMA for college savings, convert the UGMA into a student-owned 529. No need to convert the savings account ahead of time: this can be done immediately before filing FAFSA, if it would make a difference. Student-owned 529 accounts are assessed at the parent rate of 5.6% for FAFSA, rather than the student rate of 20%.</p></li>
<li><p>If grandparents or other relatives plan to give you money as part of their estate planning, have them open a 529 with the student as a beneficiary instead. Grandparent-owned 529s are not included in the FAFSA calculation.</p></li>
<li><p>Save as much money as you can; having the funds to pay for college is much better than the alternatives.</p></li>
</ol>
<p>money in retirement accounts isn’t assessed as assets, HOWEVER, any pre-tax income you put into your 401K is added back in as income. Insane, but true!</p>
<p>Whether or not you should be looking for job is something only you and your husband can answer. Remember, paying for college is just ONE part of your total family financial picture. If you go back to work, what will your childcare expenses be like? How much money will you be paying for the commute to work? What about your work wardrobe? What about the likely increase in food expense from eating out more because no one is home to cook? Will you have to pay for full-day summer camps so that you can work June-August? And those are just money factors. There are psychological and emotional consequences as well - maybe good ones, maybe bad ones - that will come from the shift in relationships in the family.</p>
<p>When you find out your EFC (expected family contribution) from the FAFSA, look at your family finances and see how you can meet that. If you can’t (we sure can’t) what other options are there? Is your community college an option for the first two years? (ours is) What about your in-state public university? (commuting from home, ours would be a stretch but do-able) What are your expectations for your children’s educations and what are your husband’s? Are you even remotely on the same page about this?</p>
<p>Just remember that NATIONWIDE the greatest number of college age students are attending public community colleges. Most of them are also working part-time to help pay for their educations, many are working full-time while studying. The second largest number of college age students are attending their home-state public universities. Most of these kids are also working part time, and a few are holding down full-time jobs. If you determine that the only way your family can afford to educate your children is by having them work part-time and study in public institutions, you will not be alone.</p>
<p>While you are picking up things to read about this at the library, look for a copy of “Personal Finance for Dummies”. The author does talk about paying for college, but he also discusses other financial issues that you surely are (or will) face. It really helped me to put the larger picture into perspective.</p>
<p>I just ran the EFC (nice that the tax folder is still sitting on the counter, not filed!)</p>
<p>Oh my. Yes we can afford to pay for all of our children to go to school (but not live or save for retirement)</p>
<p>Clearly we will have to move some money into retirement, etc… maybe buy the car outright…but with this economy having two years in available savings (albeit no college payments) is something we feel very comfortable with. It looks as though that might hurt us now. We have lived below our means and saved as much as we could.</p>
<p>I know one thing for certain, I am very glad I am starting this process very early.</p>
<p>I’ll never forget that sick, there-must-be-something-wrong-with-my-eyes feeling when I first saw our EFC. And it does seem perverse, like you are being punished for being such a good saver. From the colleges’ standpoint, they want to save their grant money for students who don’t have those funds available, rather than those who do (like you, unfortunately). </p>
<p>It is indeed good that you’re starting so early. You have time to do a little research and move the maximum amount of funds possible into retirement accounts and other places where colleges are less apt to look. </p>
<p>One possibility, although it may be uncomfortable, is to use a significant part of your savings in various ways that will help you, and yet make you look poorer to the colleges. For example, you could pay down your mortgage if you have one; many (most?) colleges do not look at equity as a college piggy-bank. Paying off the car (and any other non-mortage debt) will improve your current cash flow, while reducing the size of that juicy savings account. </p>
<p>Consider doing some strategic spending right before you file FAFSA. We bought D’s college laptop in January instead of June, and paid our property taxes 3 months before they were due. I’m not advocating a wild spending spree, but if you’re going to make a major purchase anyway, time it so that your balance sheet looks smaller when it counts. Do you need a new washing machine; does the house need a new roof? Neither of those items are counted against you on FAFSA, but the cash you’re saving to pay for them does. </p>
<p>When it’s time to put together the list of colleges to be applied to, concentrate on those who are known for giving generous merit scholarships. Have your kids apply to schools where their grades/scores would put them in the top 25% of applicants.</p>
<p>But unfortunately, unless all of your kids get full-rides, you’re probably going to have to reconcile yourselves to having a considerably smaller safety net. The choice you have is in determining exactly how it shrinks. You can either mail it off to colleges, or you can use it to benefit your own financial picture in ways that aren’t on FAFSA’s radar.</p>
<p>I would recommend doing a paper FAFSA with worksheets for your first time through so you actually understand how the process works. It really doesn’t take long and I think it will help guide you in your decisions over the next few years, without having to run back to the computer with “what ifs”! </p>
<p>You may have 2 years worth of savings in the bank and assume that’s what is driving your EFC. That may or may not be true…it may simply be that your income is high! Every family has an asset protection allowance which is based on the age of the older parent and the number of parent’s in the FAFSA household. A 2-parent family, with the older parent being 48 at the time of FAFSA filing, would have a savings allowance of $52,400. So, the first $52K of this family’s reportable (non-retirement) savings is not going to affect the EFC. Above that, only 1/8th of the assets are included in your EFC.
Please note that all the “allowance” tables are subject to annual adjustment by the DoE, so these calculations will change (likely in your favor).</p>
<p>This site is also a treasure trove of information and advice about all aspects of financial aid, this link will get you to their “top 10” list for maximizing aid:
[FinAid</a> | Financial Aid Applications | Maximizing Your Aid Eligibility](<a href=“Your Guide for College Financial Aid - Finaid”>Maximizing Your Aid Eligibility - Finaid)</p>
<p>I agree that a good book like Paying for College Without Going Broke and a carefully researched college list are priceless. I liked this site for gathering initial data on college’s D was interested in as it has a “compare” feature and gives more detailed breakdowns on the financial aid than college board does:
[Student</a> Aid on the Web](<a href=“http://www.studentaid2.ed.gov/gotocollege/campustour/]Student”>http://www.studentaid2.ed.gov/gotocollege/campustour/)</p>
<p>You might also start looking at scholarships that any high school kid, or non-seniors, are eligible for. For example, I believe the Discover is juniors only and the YES may be as well. Finally, since graduation is almost upon us, pay attention to the scholarship announcements in your local paper and find out from seniors/GC if the high school gives packets of local scholarship apps to students. Ours does, but my D also looked at the website of another local school and found others, not included in our packet, that she was eligible for. Local scholarships, of course, are generally less competitve than the national ones and can add up quickly!</p>
<p>One last note…double check anything your high school or outside “aid counselors” not working at a college tell you about filling out forms or getting gov’t/institutional aid. Alot of inaccurate/dated info is given and some “counselors” push plans and products that are inappropriate to a family’s overall financial goals.</p>